Purchase of AviaraDx positions bioMerieux for cancer care niche

DURHAM – Medical diagnostics company bioMerieux is positioning itself to be a player in an emerging approach to cancer treatment in which drug therapy starts with the diagnostic test.

The French company, which has its North American headquarters in Durham, recently acquired San Diego-based AviaraDx, a company that tests the molecular biology of a sample in order to diagnose cancer.

The acquisition gives bioMerieux capabilities it did not previously have, says Herb Steward, bioMerieux’s executive vice president and general manager for North America.

“This moves us into the molecular area,” Steward says.

BioMerieux announced its $60 million purchase of AviaraDx on Sept. 11. AviaraDx and its 19 employees will operate as an independent entity within bioMerieux under a new name: bioTheranostics, which is an appropriation of the name given to the emerging field in which it works.

Theranostics is the merging of therapeutic treatment with diagnostic tests, says Howard McLeod, director of the Institute for Pharmacogenomics and Individualized Therapy at the University of North Carolina at Chapel Hill. Many new drugs now are developed with companion diagnostics. These diagnostics help doctors quickly determine who will benefit from a drug and who won’t.

McLeod says theranostics is now most often used with cancer drugs – situations in which a patient’s drug costs can run into the thousands of dollars even with insurance coverage. He says the information that theranostics can provide has insurance companies paying attention.

“It’s smart for business, but it also happens to benefit the patient,” he says.

Christophe-Raphael Ganet, an analyst with Oddo Securities, says in a recent research report that acquiring AviaraDx was crucial for bioMerieux to be credible with oncologists. He says it offers bioMerieux more technological and scientific content than any other acquisition target of the past two years.

“This project fits well with the theranostic strategy, although this business is not set to generate significant sales before 2012,” Ganet says.

BioMerieux says AviaraDx will lose about $8 million this year and will not break even until about 2012. BioMerieux, whose stock trades on the Paris Stock Exchange, reported $1.54 billion in 2007 revenue. North America represents 25 percent of the company’s sales.

McLeod says there is no clear leader in theranostics. Companies, such as Roche and Abbott, that have both a therapeutic division and a diagnostic arm are moving into the field.

Natixis Securities analyst Cedric Moreau notes in a recent research report that Roche acquired Tucson, Ariz.-based Ventana Medical Systems this year to reinforce its presence in theranostics.

McLeod sees one potential drawback to theranostics. He says if a pharmaceutical company sees that only a small percentage of patients benefit from a drug, it may not pursue the drug due to insufficient market potential.

“Theranostics could work too well,” he says.

BioMerieux employs 1,400 in the United States, including 550 in Durham operations that include research and development and manufacturing, Steward says. The company also has operations in the St. Louis area that have roughly the same head count as Durham’s facilities. The diagnostic products made at both the Durham and St. Louis facilities, as well as the oncology tests from AviaraDx, are marketed globally.

Steward says he expects employment levels, including staffing at AviaraDx, to hold steady in North America.